(Solution) If Apple costs $130 today, interest rates are 10%, and Apple pays a $3 dividend every year, what is the fair forward price of a five-year forward?
•If Apple costs $130 today, interest rates are 10%, and Apple pays a $3 dividend every year, what is the fair forward price of a five-year forward? •What would the fair forward price be if Apple’s stock price goes up to $150? : ($100 IBM price today, 2 year forward, 10% interest rates, $5 dividend per year), suppose you bought the forward at the fair forward price of $110.5. Now IBM falls to $80. You want to get out. What is the most you would pay to get out of your forward contract struck at $110.5?
This question was answered on: May 23, 2022
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